Over 1.5m Families Have Taken Out Loans To Pay For Christmas And Birthdays, New Research Shows

48 per cent of low income households have reduced spending on gifts for family due to cost. (Alamy)

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As of October, around 1.6m families hold a loan that they took out to fund special occasions like Christmas or birthday gifts, according to the Joseph Rowntree Foundation (JRF).

Overall, almost half of low-income households — or 5.6m — have reduced spending on gifts due to financial pressures, the JRF research found. 

Around 430,000 families held high-cost credit or unregulated loans, also known as loans from ‘loan sharks’, to pay for special occasions. 

Of those who had taken out loans to pay for special occasions like birthdays or Christmas, 74 per cent had taken out loans to pay for food, housing, or essential bills like council tax or energy. 

In the same month, 4.3m low-income households were in arrears on at least one household bill or credit commitment. 

Rachelle Earwaker, senior economist at the JRF, told PoliticsHome the ongoing cost-of-living pressures and societal pressures around Christmas were leading people to borrow to fund the festive period. 

“There’s so much societal pressure around holidays like Christmas, and particularly for parents who just want their child to be able to open up something on Christmas day and feel a little bit of that joy like everyone else,” said Earwaker.

“It’s completely understandable that parents feel that, and also that families want to be able to get together with their family members with their loved ones, to be able to celebrate a little bit of time off, potentially together, and lean into that.”

She said “it makes sense” that many families nationwide are “having to look anywhere they can” to fund gifts and celebrations while also trying to cover essentials.

“It’s not a preferred option for a lot of families — no one wants to be paying interest on Christmas presents or interest on the turkey that is going on the table.

“But in times where your income simply isn’t stretching to meet those costs, we know it’s what quite a lot of people are turning to.”

The JRF estimates that households in the bottom 40 per cent of incomes face being around £450 worse off in 2029 than they are right now.

The charity has called on the Labour Government to help disadvantaged families by scrapping the two-child cap, which Prime Minister Keir Starmer has so far resisted calls to do, and by “making sure childcare and early education are good quality and affordable”.

The data is the latest sign of the pressures facing disadvantaged households this winter. 

It is one of many challenges facing ministers in the coming weeks as the Labour administration prepares for its first Christmas in power since being elected in July. 

Amanda Pritchard, Chief Executive of NHS England, last week told PoliticsHome that the health service would face “unprecedented demand” this winter after experiencing its “busiest October ever”.

Hospitals are dealing with significant spikes in flu, norovirus, respiratory syncytial virus (RSV) and Covid-19 infections, Pritchard said, adding “the more that we can do to encourage vaccination, the better”.

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